Blog

Setting aside differences to move forward

Over the past few months, the local social unrest, particularly the continued vandalism and disruption to airport and roads, not only has damaged Hong Kong's image as a safe city and an international commercial, trade, aviation and financial hub, it has also hardly hit our local economy. The tourism, retails and hotel sectors are suffering the most.

While August, as summer holiday, is usually a tourism high season, the drop in tourist arrivals has accelerated from a 5 per cent year-on-year decrease in July to a 40 per cent plunge in August. According to the trade, hotels in some locations had seen occupancy rates drop to about half, while room rates plunged 40 to 70 per cent. Similar situation is observed in the retails and catering sectors. It is worrying that so far there is no sign of improvement in the near future.

Repeated vandalism and disruptions to major transport infrastructure, such as trunk roads, railway and airport, not only have disrupted the daily routines of citizens, but also affected many international conferences, exhibitions and mega events. Many conferences and business journeys have been postponed or even directed to other destinations.

In the aspect of trade, under the increasing tension of China-US trade conflict, the value of Hong Kong's total goods exports recorded a year-on-year decrease of 5.7 percent in July. For the first half of this year, the value of all Mainland exports via Hong Kong to US decreased by 15.2 per cent on a year-on-year basis.

To assist local small and medium-sized enterprises (SMEs) to counter the challenging external and local economic environment, I further announced two new initiatives to help our SMEs to cope with liquidity problem, in addition to the supporting measures announced in August. First, introducing a new 90% Guarantee Product under the SME Financing Guarantee Scheme (SFGS) with a maximum facility amount of HK$6 million. To benefit individuals with relatively less operating experience or looking to set up new businesses, the 12 months operating experience requirement was also waived. Second, allowing the SME borrowers under the SFGS to apply for principal moratorium of up to 6 months which is renewable, subject to a maximum of 12 months in total. During such period, only interest payments have to be made. I believe that the new relief measures could timely help SMEs to ease their cash flow pressure.

Nonetheless, all these measures could only alleviate some of the pressures faced by SMEs in short term. In the long run, to break the deadlock and make space for social and economic recovery, we need a more stable environment, without further vandalism and disruption to transport infrastructure, as well as our willingness to look for political solutions and cope with economic challenges.

Last week, Fitch downgraded the credit rating and outlook of Hong Kong, as they argued that the recent social incidents in Hong Kong are calling into question the effective implementation of the 'one country, two systems' principle. Furthermore, Fitch mentioned the gradual rise in Hong Kong's economic, financial and socio-political linkages with the Mainland of China implies its continued integration into the Mainland's governance system, which may present greater institutional and regulatory challenges over time.

Fitch's remarks are purely speculative and groundless. Obviously, it misunderstood the arrangement of 'one country, two systems', under which Hong Kong has always been serving the needs of China with our strengths, leading to a mutually-beneficial and closer economic and trade tie between the two places. On one hand, Hong Kong has been helping China to deepen the economic and financial opening and reform. At the same time, Hong Kong is connected with the fast-growing economic impetus and the large market of the mainland, bringing greater space for development and opportunities to various related industry in Hong Kong. It is of Hong Kong and China's fundamental interest to ensure the comprehensive and correct implementation of the 'one country, two systems'.

'One country, two systems' is the cornerstone of Hong Kong's success. The Basic Law of Hong Kong protects the freedom and rights of individuals, as well as social order, people's personal safety and the safety of their properties. We should not condone violence and acts breaching social order which are eroding our core values and institutional advantages. Desecration of national flag and national emblem by some radical individuals are blatant defiance of the 'one country, two systems' principle.

To find a way out of the current impasse, we need to conduct pragmatic dialogues. The Chief Executive is making her best effort and has initiated four actions to foster dialogue, including (1) formally withdrawing the Fugitive Offenders Bill; (2) appointing new members to the Independent Police Complaints Council (IPCC); (3) the Chief Executive and other principal officials will reach out to and begin direct dialogue with the community; and (4) inviting community leaders, professionals and academics to independently examine and review society's deep-seated problems. These actions, of course, are no silver bullets that could settle all the problems instantly, but still, they are making steps forward in a positive direction. Let us set aside our differences, stop violence, replace conflicts with conversations, and look for practical and constructive way out for Hong Kong.

8 September 2019